이 기사는 2021년 09월 24일 08시08분 thebell에 표출된 기사입니다

Jcontentree Corp, part of South Korea’s media giant JoongAng Group, is stepping up efforts to keep its theater chain in operation, a move that is critical for the company to turn a profit.

The media company last month guaranteed a perpetual loan of 50 billion won ($42.4 million) issued to its subsidiary Megabox JoongAng, according to a regulatory filing. The loan maturity is 30 years.

A perpetual loan, like a perpetual bond, is deemed to be equity as its maturity can be extended indefinitely. The loan is expected to help reduce the cinema chain’s debt-to-equity ratio from 1,200% at the end of 2020 to some 600%.

Megabox, the country’s third biggest cinema chain, generated robust cash flow until the Covid-19 pandemic hit. As the pandemic drags on, its financial performance has weakened significantly, with annual sales declining by two-thirds to around 100 billion won and an operating loss widening to 70 billion won.

Sluggish results from Megabox resulted in its parent company swinging to a consolidated operating loss of 56.8 billion won in 2020. In the first half of this year, the theater chain recorded revenue of 40.7 billion won and an operating loss of 38.3 billion won.

Moreover, Megabox’s company building in Seongsu-dong, eastern Seoul – which was built in 2019 after three years of construction – has accelerated an increase in the cinema chain’s debt burden, with its debt-to-equity ratio jumping from about 100% in 2018 to 400% in 2019.

As part of efforts to improve the theater chain’s financial status, JoongAng Group recently appointed Hong Jeong-in, a content expert and the younger son of JoongAng Holdings chairman Hong Seok-Hyun, as chief executive of both Jcontentree and Megabox.

Whether Jcontentree will be able to turn a profit will likely depend on its theater arm’s financial results in the coming months. The company is expected to see strong results from its drama production unit as “D.P.”, which is distributed through Netflix, turned out to be successful and several other TV shows are waiting to be aired.

“There are many films that will be released in the second half of this year, including blockbuster ‘007 No Time to Die’,” said an official at Jcontentree. “We expect more people will go to the theater if the government shifts to the ‘With Corona’ policy.” (Reporting by Seul-gi Kim)